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CNPC starts construction of controversial Myanmar oil line

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Nov. 4 -- China’s state-owned China National Petroleum Corp., aiming to improve the security and speed of Chinese oil supplies from the Middle East and Africa, has begun construction of import facilities for an oil pipeline across neighboring Myanmar.

CNPC said it has begun building a large-scale oil port in the Myanmar city of Kyaukpyu in Rakhine State as a facility for the planned China-Myanmar oil pipeline project.

Kyaukpyu is on Ramree Island about 400 km northwest of Yangon, and is due to become the import terminus for Middle East and African tankers supplying oil to China. The new port will be able to receive vessels of up to 300,000 dwt and will have storage capacity of 600,000 cu m.

The oil will then be transported from Kyaukpyu by a 771-km line across Myanmar to Kunming in China's Yunnan province. CNPC said the line will eventually carry 84 million bbl/year of oil, but it did not say when the line would begin operating.

The pipeline is expected to improve China’s energy security by speeding delivery of Middle Eastern and African oil to China and eliminating the need for oil tankers to pass through the crowded and pirate-infested waters of the Malacca Strait between Malaysia and Indonesia.

China has been determined to diversify its oil import routes dues to concerns about supply security. About 75% of China's oil imports in 2008 were from the Middle East and Africa and most of those cargos were shipped through the Malacca Strait.

Experts say the oil line will reduce the length of the transport route for oil to China by 1,200 km, while providing supplies for two refineries to be located in Chongqing city in Sichuan province and in Yunnan province.

Analyst IHS Global Insight acknowledged the importance of the new line, but said new security problems would none the less arise.

“The pipeline passes through remote areas of Myanmar where tensions exist between Myanmar's government and rebel groups, which could create security issues for the project as well as technical difficulties related to construction,” the analyst said.

“Hence, although the pipeline will help China diversify its crude oil imports, concerns remain over the reliability of supplies,” IHS Global Insight concluded.

The start of construction of the oil facilities in Kyaukpyu coincides with CNPC’s plans for another pipeline from Myanmar, which is scheduled to begin carrying 12 bcm/year of gas to southwestern China in 2012.

Pipeline controversy
The two pipelines have created controversy as Myanmar activists and their supporters have called for China to halt construction, warning of instability and civil unrest if the country's ruling junta continues to starve its people of energy.

“Past experience has shown that pipeline construction and maintenance in [Myanmar] involves forced labor, forced relocation, land confiscations and a host of abuses by soldiers,” said the activist Shwe Gas Movement (SGM), in a report earlier this year.

Underlining those concerns, as well as those of IHS Global Insight, Myanmar military forces clashed with rebels near the new gas pipeline route in August, resulting in more than 30 deaths and forcing 30,000 residents to flee into China.

As a result, more than 100 groups and political parties across 20 countries participated in the SGM petition which was intended for China’s President Hu Jintao and presented to Chinese embassies in Asia, Australia, and Europe on Oct. 28.

Contact Eric Watkins at hippalus@yahoo.com.


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